Published in Journal of Law and Economics, Volume 49, Issue 1, April 1, 2006, pages 91-114.
The music industry has repeatedly expressed concerns over potentially devastating impacts of online music sharing. Initial attempts to control online file sharing have been primarily through consumer education and legal action against the operators of networks that facilitated file sharing. Recent legal action against individual file sharers marked an unprecedented shift in the industry’s strategy. The focus now is on well-publicized legal threats and actions on a relatively small group of individuals to discourage overall music file sharing. To determine the resulting impact of these legal threats, we passively tracked online file-sharing behavior of over 2,000 individuals. We found that individuals who share a substantial number of music files react to legal threats differently from those who share a lesser number of files. Importantly, our analysis indicates that even after these legal threats and the resulting lowered levels of file sharing, the availability of music files on these networks remains substantial.